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A model in Nigeria’s IPP sector

Interview - May 18, 2012
Upper Reach speaks with Nsima Ekere, Deputy Governor of Akwa Ibom State and former Chairman of Ibom Power Company, about the recent huge improvements in the state’s general infrastructure and about Ibom Power’s role in meeting Nigeria’s demand for power
IBOM POWER COMPANY, NIGERIA
NSIMA EKERE | DEPUTY GOVERNOR OF AKWA IBOM STATE AND FORMER CHAIRMAN OF IBOM POWER COMPANY

We have already seen the first signs of changes with the Power Act of 2005, which starts unbundling the Power Holding Company of Nigeria (PHCN) and successor companies that are now up for privatisation. Generally, could you please elaborate about the opportunities you see arising from this privatisation process?

Power is like the tonic that will change not just our economic fortunes but even the social development of the country. Everything is hinged on power because to a very large extent it is a pre-requisite for so many things. PHCN originally had the worst possibility of generating power, transmitting the power and distributing it to people’s homes. Unfortunately, hitherto we did not have a lot of good stories to tell about the Nigerian power sector. But fortunately with the reforms going on now, first of all the unbundling of PHCN, we have about 11 successor distribution companies. We have one transmitting company and a lot of generating companies as well. Of course we have also given the private sector and some state governments the opportunity to participate in generation.
 
That is where we in Akwa Ibom State come in. In fact we have a pioneer independent power project in this country. Ibom Power Company is still being referred to as a pioneer IPP (independent power producer) in this country for many reasons. We now have in place a facility that can generate 191MW of electricity made available through three No. standard GE turbines. We have recently complemented this initiative because one challenge that we had with the generation was the issue of gas and the reliability of gas supply. So what the state government did as a pioneering effort, the very first state government in this country to ever try something like this, was we partnered it with a private sector company from the UK called Seven Energy. We are working with their Nigerian subsidiary called Septa Nigeria Limited. They own some oil and gas fields within Akwa Ibom State and we got into an agreement with them to develop and process the gas from their gas fields within the state for use in Ibom Power.

We then built a 67-kilometre pipeline from where their processing facility is, to Ibom Power Plant so that from the third quarter of 2012 we are assured of regular supply of gas to the power plant which is the first ingredient in the generation of electricity. So there are a lot of opportunities generally for investors and businessmen in the power sector, even in the distribution business. Presently we are going through a process of privatising the distribution arm of the business. The 11 distribution companies, the subsidiary companies of PHCN, are up for grabs and I think that that is a huge opportunity. But, I am also of the opinion that even the distribution companies could be sub-divided and delineated along state boundaries. It would make better sense to have distribution companies along state boundaries so that each state government would be interested in seeing that power is distributed efficiently within its territory. It would become an issue for political campaigns and you can see that a political office-holder might win or lose an election depending on how he is able to handle the issue of power in his state, how he is able to give power to his people. Particularly for the rural areas, economic considerations may not be fully met when you look at power supply, which would make it a bit unattractive for the private sector. The private sector is there to make money and they can make money in the urban centres but in the rural areas they might have a problem. That is where the State Government comes in.

So if you have it along state boundaries the State Government will realise that to some extent they have a social responsibility to provide power to their citizens and to make sure that there is power within their state. Then they can make whatever investments will be required to augment whatever the private sector does. I would see the distribution side of the business being more successful if there was this synergy between the private sector and the states. Therefore, I would like the regulatory bodies to explore the option of demarcating distribution zones along state boundaries. This would give the opportunity for power to get to the homes and offices of the end users. There are also opportunities of course in power generation. The total capacity in this country today is still less than 5,000 megawatts. I think as a country we need well over 50,000 megawatts. So there are still a lot of opportunities in the generation arm of the business. The sky is the limit for serious investors in the power sector in Nigeria.

You mentioned the unbundling of the PHCN which was following a global road show of IPP, and over 300 companies expressed their interest in bidding for sections of these power assets. These include international giants such as Brazil’s ProInfra, India’s Essar and Tata and western contractors such as Globeleq and Siemens. What do you believe are the benefits of such a large-scale international exposure to the IPPs such as Ibom Power Company?

Ibom Power Plant is indeed a unique case. That is why I say that within the power sector today they still regard Ibom Power as a model IPP and that is because from the outset Ibom Power Plant was set up and modelled along international standards. From the very beginning we were dealing with international companies like Globeleq as you mentioned. Globeleq was part of Ibom Power Plant. In fact we had a JDIA (Joint Development and Investment Agreement) with Globeleq.

So whatever experience and international standards there are have already been applied by Ibom Power. We have also had international consultants, in fact 90% of the consultants that worked for Ibom Power were international consultants. So we have already benefited greatly from having that exposure. Generally for the country it is a very good thing to have the international power players interested in Nigeria because, if for nothing else, it gives an opportunity for them to bring in funding from the international community, which definitely helps boost whatever we are doing locally.

You have just mentioned how Ibom Power Company is unique and is regarded in power circles as the most successful model IPP in Nigeria. When we interviewed Dr. Amadi from NERC he was saying that at the moment 42 licenses had been given out and all of these licenses collectively have a capacity of about 6,000MW. As the former chairman of Ibom Power Company what does it mean to you to play such a pioneering role in this IPP aspect of power generation?

I was Chairman of Ibom Power Company and worked very closely with the company from 2008 until May 2011 when I was elected Deputy Governor of the state. I still have a lot of interest in the power sector. I still work closely with Ibom Power Company. A new board will soon be put in place and they will have a new chairman. It does feel good to be pioneers; you have what everyone else is using as a yardstick and model. They want to copy you. On the other hand it has the cost of learning. A lot of the mistakes we made and a lot of the things that we did would probably not have been done if the experience had been there. Until recently power generation was an exclusive preserve of PHCN so you do not have that technical capacity readily available in the market in the country. That is why when we came in a lot of the people who worked for us and with us were international players because we did not have local capacity to do most things. That made the costs a bit high. This was the pain we suffered as an original, as a trailblazer as it were. But I think that it feels good that we were at least able to put something together which is still regarded today as a model in the IPP sector of the country.

This leads me to another question. You were the chairman of Akwa Ibom Investment and Industrial Promotion Council and you were responsible for initiating programmes, which also attract international, foreign direct investment to Nigeria and especially to Akwa Ibom. Can you give me an insight into how crucial FDI is to Nigeria's economic transformation and why would investors prefer an IPP over the PHCN successor companies?

First of all, as a government, as a country and even as a state, in fact, quite crucially as a state, it is in our best interest to be able to attract FDI (Foreign Direct Investment) because of course it will help to improve our economy, create jobs, and create wealth for the people. It is something that every government and every state would like to see happen in its territory. Now, investors' investment decisions are based on a lot of things. First of all and with regard to the power sector deregulation, the advantage of investing in PHCN assets is that they are already there. So the gestation period, the period of development will be short and then you might start having returns almost immediately. But then this has its bad side. If you are building an IPP from the start you know what you are getting, you know that you are using modern technology, brand new equipment and all that as opposed to going to buy something that has already been put up where you cannot guarantee the technical integrity of what is on the ground. It depends on who the investor is and what their criteria and parameters are. But for me, if I was coming in, I would go for a brand new IPP instead of going for something that has already been built.

The President himself was here in 2010 to inaugurate the completion of the first phase. What are the further steps for Ibom Power Plant?

The plant was supposed to have over 700MW in totality. For the plant, we are thinking of having five GE frame 9 turbines. Each of those frame 9 turbines has the capacity to generate 110MW. So with five of them we should be able to have about 550MW output.

Incidentally, when we were developing phase one, we already had carried out all the civil works necessary to carry phase two, all of that is on the ground as we speak now. As a government we are concentrating first of all on the teething problems. We have the capacity, technically and financially to partner with others to develop phase two. I can tell you that for now we are concentrating more on making sure that phase one works and works efficiently before we commence work on phase two. But, we will be willing and we are open to discussions with any interested partners to develop phase two of the plant.

I would like to move the interview now more to the larger picture regarding Nigerian and UK relations. Early 2011, David Cameron, the Prime Minister, visited Nigeria and he expressed that he truly believes in the future of Nigeria, describing your country as “a dream waiting to happen”. How do you evaluate the current relations between Nigeria and the UK?

What I have seen is a change of attitude from the UK in terms of their business relationship with Nigeria. I would say personally that I have been a bit disappointed with the level of co-operation and collaboration that exists presently between the Nigerian and British business community. Nigeria and the UK had a relationship from way back. In fact at independence from Britain in 1960 we were expecting to still find a lot of support from UK, businesses and businessmen to help grow the Nigerian economy. To a very large extent that has been absent unfortunately, unlike in the Francophone countries. Most countries that were under French colonial rule are better developed than those that were under British rule. You can go around the whole of West Africa and you will see that. So if all of a sudden, the British feel that they need to have a change of heart and they come back to the country, as the Prime Minister and the Lord Mayor came, then well maybe good things are beginning to happen. I would like to see a lot of support, a lot more co-operation, and general interest from UK businesses and businessmen in Nigeria.

There are lots of opportunities in Nigerian businesses. In fact, recently we had the Nigerian Economic Summit and there was a paper presented by a businessman, Tony Elumelu, and he said that the kind of opportunities he has had and the things he has experienced doing business in Nigeria could only have happened in Nigeria. I do not think there is anywhere else in the world that has the kind of economic and business opportunities that Nigeria has. I used to be in real estate and I have quite an interest in it and I know that the kind of growth you get in property values in Nigeria you do not get anywhere else in the world. It is like that for most other sectors. That is why I would be very happy to genuinely invite UK businesses to please take Nigeria a bit more seriously because I know there are opportunities and I am sure we could mutually benefit from your doing business in Nigeria.

Our readers are always interested to hear a bit more about the man behind the words and for someone of your young age, it must be said that you have had a very successful career.  You started an active political career in 1997 with your election into the Akwa Ibom State House of Assembly. You remain dedicated to the State Government up to this very day serving as Deputy Governor.  What legacy would you like to leave behind for your country? 

I think that most of the problems we have in this country are because until very recently we did not have a lot of professionals coming into politics and government. So government and government businesses were run like it was nobody's business but that has changed. For example in Akwa Ibom state we have the Governor, His Excellency, Chief Godswill Akpabio, who also came in from the private sector. That is why between 2007 and now while he has been Governor, a whole lot has changed. You can see massive infrastructural development in the state. You can see that we were able to complete the international airport where you came in, the power plant, and the Le Meriden Hotel where you are staying.

We talked earlier about the Ibom Tropicana Project, which is a business/leisure complex that has everything in it. It has six cineplexes open already and also in the same place we are going to have a second 5-star hotel on 15 floors. We will have an international conference centre seating about 7,000 people, an American-style shopping mall and a wet and dry park for children. All this is done by the government and it is going to be completed before 2015 when we are leaving office. We have had about 212 brand new roads built in the state. We have two types of roads, state and federal. Federal roads ordinarily are the responsibility of Federal Government and state roads are the responsibility of the State Government. Of course as a State Government you do not wait for the Federal Government to build the roads because if you do, you probably would not be able to find a road to use. So, His Excellency, the Governor, went ahead and built federal roads as well. So today you can drive all the way to Uyo on a dual carriageway with street lights and you would think you are in Germany on the autobahn. We have the same thing between Abak and Ikot Ekpene and other places.

A lot of things were done and achieved in the last four years. More importantly, His Excellency, the Governor, also introduced free compulsory education up to secondary school level for children and we tripled school enrolment in the first two years. That is building a foundation for Akwa Ibom for tomorrow, training our youth, giving them an opportunity in life, and giving them a broader outlook for living generally. This goes to show that government can truly work. His Excellency, the Governor, understands what his mandate is and that is to provide good leadership for Akwa Ibom people. What the people want and expect is that their government should be responsive to their needs, a government that provides you with the roads you need and gives you free education. We have built five new hospitals in the last four years. We are presently building a referral centre, the 20th Anniversary Hospital here in Uyo, we have completed the airport, the independent power plant is completed, about 212 brand new roads built - the people are happy, they are seeing their money working for them on the ground. So they help us.

Any final message for our readers?

First of all, just let me thank you very sincerely for being here today, for your interest in Nigeria and for the very broad-minded view and approach you have decided to take in doing your project here and in getting to know Nigeria. I think that the greatest problem we are having in this country is that for some strange reason we are getting very bad press. The international media has been very unfair to Nigeria and so the message being sent out there about our country is not a clear reflection of what is really going on locally. A lot of foreigners come into this country and discover that Nigeria is completely different from the image portrayed and its international perception. I don’t know what exactly foreigners’ expectations are, maybe they think they will come to Nigeria and see everyone is under siege, probably see some people living in trees and things like that. But in reality Nigeria is as calm, peaceful, interesting and serene as you have found. So I thank you for your interest in Nigeria and for what you have come to do.

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